Author Topic: Ratesetter (P2P lending)  (Read 5762 times)

AliEli

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Re: Ratesetter (P2P lending)
« Reply #50 on: September 25, 2019, 08:04:32 AM »
From Ratesetter:

In November 2018, RateSetter shifted from charging borrowers an upfront risk fee (Risk Assurance Charge) to a risk fee that is captured over the lifetime of a borrower’s loan (Risk Assurance Rate). Because of this change, the Provision Fund buffer is now made up of cash held in the Provision Fund as well as future cash inflows that are due from borrowers over the lifetime of their loans, see image below.

While the current Provision fund cash balance may appear to be decreasing as a member of Financial Independence Retire Early rightly pointed out, the 'Expected Provision Fund inflows' is growing (currently ~$4.8m). A good way of measuring the Provision Fund's overall ability to meet future borrower missed payments is to look at the 'Provision Fund buffer' or alternatively the ‘Current estimated default coverage ratio’ both of which have remained steady over the last year.

The Provision Fund typically protects investors when the Current estimated default coverage ratio is greater than 1x. Given that the Current estimated default coverage is above 1.5x, we expect the Provision Fund to maintain its unblemished record of protecting investors against borrower late payments or defaults.

So ratesetter is charging an extra fee, but is that going to be passed on lenders?

mjr

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Re: Ratesetter (P2P lending)
« Reply #51 on: September 25, 2019, 02:14:23 PM »
They said that it has changed from an up-front fee to a rate throughout the life of the loan.

Although light on detail, it's not described as an extra fee, merely a change as to how they fund the provision fund.

marty998

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Re: Ratesetter (P2P lending)
« Reply #52 on: September 25, 2019, 03:11:41 PM »
From Ratesetter:

In November 2018, RateSetter shifted from charging borrowers an upfront risk fee (Risk Assurance Charge) to a risk fee that is captured over the lifetime of a borrower’s loan (Risk Assurance Rate). Because of this change, the Provision Fund buffer is now made up of cash held in the Provision Fund as well as future cash inflows that are due from borrowers over the lifetime of their loans, see image below.

While the current Provision fund cash balance may appear to be decreasing as a member of Financial Independence Retire Early rightly pointed out, the 'Expected Provision Fund inflows' is growing (currently ~$4.8m). A good way of measuring the Provision Fund's overall ability to meet future borrower missed payments is to look at the 'Provision Fund buffer' or alternatively the ‘Current estimated default coverage ratio’ both of which have remained steady over the last year.

The Provision Fund typically protects investors when the Current estimated default coverage ratio is greater than 1x. Given that the Current estimated default coverage is above 1.5x, we expect the Provision Fund to maintain its unblemished record of protecting investors against borrower late payments or defaults.

So ratesetter is charging an extra fee, but is that going to be passed on lenders?

Not that I have ever been a borrower but I understand borrowers pay a much higher rate than what the lender selects, but the lender only ever gets the specified rate they want.

For example, The lender might charge 5%. Then 0.5% is added for Ratesetter's interest margin, then a couple of % is added for funding the provision fund, then you have fees and charges added on top. The final all in "rate" might be well north of 10-13% depending on the amount you borrow, but the lender only gets the 5%.

mjr

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Re: Ratesetter (P2P lending)
« Reply #53 on: September 25, 2019, 03:51:47 PM »
From another forum (not by me):

" I wanted to borrow $10k a few years back and they wanted to charge me $1300 even though I had no debt and have a combined income of $150k. Doing the calculations, the low interest rate of 9%, compared to banks which were offering 13%, quickly became about 20% after accounting for the fee. I declined. They either gouge customers who don't pay attention to all costs involved, or they lose them for stupidly high fees. Not a great model for a society waking up to their finances. "

marty998

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Re: Ratesetter (P2P lending)
« Reply #54 on: October 09, 2019, 03:27:31 PM »
Amazing that the 3yr rate is down at 2.7% and the one month rate at 3.8% today.

AliEli

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Re: Ratesetter (P2P lending)
« Reply #55 on: October 10, 2019, 04:29:58 AM »
2.7%??!?!?!

I had another early payout today.

Is there much data about P2P lending and the general health of the economy?

marty998

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Re: Ratesetter (P2P lending)
« Reply #56 on: October 10, 2019, 02:28:31 PM »
2.7%??!?!?!

I had another early payout today.

Is there much data about P2P lending and the general health of the economy?

Crazy isn't it? 2.7% for 3 years for what are largely unsecured personal loans that banks charge 9-11% for. Ask yourself why banks need to charge that much, and still do even in the face of competition from Ratesetter.

AliEli

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Re: Ratesetter (P2P lending)
« Reply #57 on: October 10, 2019, 10:08:36 PM »
2.7%??!?!?!

I had another early payout today.

Is there much data about P2P lending and the general health of the economy?

Crazy isn't it? 2.7% for 3 years for what are largely unsecured personal loans that banks charge 9-11% for. Ask yourself why banks need to charge that much, and still do even in the face of competition from Ratesetter.

Wow. That's so true. What's the health of the company like? I've not been keeping up with all of the information they send me (I've got young kids, I don't have a lot of time to sit and think). I should probably sit down and see what's in their new pds and investor letter.

marty998

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Re: Ratesetter (P2P lending)
« Reply #58 on: October 11, 2019, 01:03:14 AM »
2.7%??!?!?!

I had another early payout today.

Is there much data about P2P lending and the general health of the economy?

Crazy isn't it? 2.7% for 3 years for what are largely unsecured personal loans that banks charge 9-11% for. Ask yourself why banks need to charge that much, and still do even in the face of competition from Ratesetter.

Wow. That's so true. What's the health of the company like? I've not been keeping up with all of the information they send me (I've got young kids, I don't have a lot of time to sit and think). I should probably sit down and see what's in their new pds and investor letter.

Ratesetter is backed by a number of venture capitalists. From time to time they'll inject more capital (I don't think it the Company itself is profitable just yet).

I was more hinting at the stupidity of lenders (i.e. Joe Public) willing to lend at such low rates.

Regarding how it performs in a downturn.... I'm guessing it won't be great but there isn't a track record in this country to go by.

AliEli

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Re: Ratesetter (P2P lending)
« Reply #59 on: October 11, 2019, 07:43:11 AM »
I don't have a lot of money in it, it's really just some money to see how it goes over the long term. I just looked at the 3 year rates and orders, and it's strange - there are 1236 orders at 2.7% totalling $176k, and the rest have an even spread (between 1 and 400 orders at other rates). It's such an outlier, I wonder whether there is something going on, or whether it's coincidence.

marty998

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Re: Ratesetter (P2P lending)
« Reply #60 on: October 11, 2019, 05:54:24 PM »
I don't have a lot of money in it, it's really just some money to see how it goes over the long term. I just looked at the 3 year rates and orders, and it's strange - there are 1236 orders at 2.7% totalling $176k, and the rest have an even spread (between 1 and 400 orders at other rates). It's such an outlier, I wonder whether there is something going on, or whether it's coincidence.

The's an option you can select to "automatically reinvest" any money in your holding account. It places that at the lowest rate, hence the large number of small offers. Lots of people are obviously not thinking about it too hard....

nofriends

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Re: Ratesetter (P2P lending)
« Reply #61 on: November 09, 2019, 07:58:14 PM »
Anyone going to one of ratesetter's events this month? As much as I'd love the opportunity, it doesn't fit in my schedule this year, which is a real shame, but hoping someone else could go ask uncomfortable questions and report back.